Foreign investors have infused nearly Rs 11,000 crore into Indian equities in the first week of September, driven by the resilience of the Indian market and growing expectations of a rate cut in the US. This investment continues the buying spree by Foreign Portfolio Investors (FPIs), who have been actively purchasing equities since June. Prior to that, FPIs had withdrawn Rs 34,252 crore from Indian markets during April and May.
According to depository data, FPIs have made a net investment of Rs 10,978 crore in equities as of September 6. The improved sentiment in Indian markets is largely attributed to recent comments by US Federal Reserve Chair Jerome Powell, who indicated the possibility of a rate cut in the near future.
The consequent decline in the US 10-year bond yield, which fell to 3.73%, has created a favorable environment for FPI inflows into emerging markets like India. However, concerns over elevated valuations in the Indian market remain. Analysts caution that if US growth concerns begin to weigh on global equity markets, FPIs may take advantage of lower prices to increase their investments in India.
In addition to equities, FPIs also invested over Rs 7,600 crore in the debt market during this period. Sunil Damania, Chief Investment Officer of MojoPMS, highlighted that fears of a potential US recession and economic challenges in China are also influencing FPI investment decisions. As risk-off strategies gain traction, there may be a slowdown in FPI inflows into emerging markets, including India.
Overall, while the outlook for FPIs in Indian equities remains positive, global economic conditions will play a significant role in determining the flow of investments in the coming weeks.
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